(in accordance with Article 181 of the Code of Criminal Procedure of the Republic of Kazakhstan)
On October 27, 2022, the Elge Qaitaru Public Foundation addressed you with a statement regarding the activities of the Eurasian Group (ERG).
On December 15, 2022, we received a response from the Ministry of Finance of the Republic of Kazakhstan to the above statement.
In addition, we have at our disposal the response of the Ministry of Finance to a similar request from NEGE Media LLP about the activities of the same company and a number of other documents.
An analysis of the available documents allows us to conclude that a significant damage was caused to the interests of the Republic of Kazakhstan. This damage is the result of the action or inaction of the former members of the Government of the Republic of Kazakhstan Mr. Marat Beketayev, Mr. Bakhyt Sultanov and Mr. Beybut Atamkulov in the process of representing the interests of our state as members of the ERG Board of Directors.
1. It follows from the response of the Ministry of Finance to NEGE Media LLP that for the period from 2017 to 2021 in favor of the Republic of Kazakhstan, which owns a 40% stake in ERG, dividends totaling $365.6 million were accrued.
At the same time, from corporate reporting available on the ERG.sarl website, it follows that the company’s EBITDA for 2017 is — $ 2.09 billion, for 2018 — $ 1.913 billion, for 2019 — $ 1.538 billion, for 2020 — 2.023 billion dollars, for 2021 — 4.210 billion dollars, and free cash flow (free cash flow) only by the results of 2021 amounted to 1.830 billion dollars.
A simple arithmetic calculation shows that ERG’s profit for the period 2017–2021 was $11.774 billion. Considering that the share of the Republic of Kazakhstan in the ERG is 40%, why were accrued dividends over that period equal to $365.6 million instead of several billion dollars?
2. Our statement also raised the issue of the excessive debt burden of Kazakh enterprises of the Eurasian Group. However, in its response, the Ministry of Finance, while recognizing the group’s debt of $7 billion in 2021, reassures us that the net debt to EBITDA ratio is about 1.5. However, the ERG corporate reporting proves that in 2021 its debt exceeded EBITDA almost twice, and by 3–4 times in the previous years. The documents we have at our disposal show that there is no clear purpose in the billions of dollars of credit agreements between the Kazakhstani enterprises of the ERG and the sanctioned Russian banks VTB and Sberbank, which allows us to conclude that the purpose of obtaining these loans is to enslave Kazakhstani enterprises.
3. Another concern for the Kazakh economy was the issue of intra-group loans, and the Ministry of Finance sees nothing wrong with that. The documents at our disposal indicate that under the agreement dated December 2, 2021, the Kazakhstani enterprises of the Eurasian Group provided a loan to the parent foreign company equal to $500 million. In addition, on January 10, 2022, immediately after the so-called “January clashes”, the ERG decided to withdraw another $1.1 billion from the country by providing a loan from its Kazakh enterprises to a parent company registered in Europe. As the result of these actions alone within a short period of time funds equal to $1.6 billion were withdrawn from the country. There is some information about other similar loans. At the same time, it must be noted that a number of Kazakhstani enterprises of the ERG are borrowers under loans received from the Development Bank of Kazakhstan and the Eurasian Development Bank, one of the founders of which is the Government of Kazakhstan.
The withdrawal of money earned by Kazakhstani enterprises from the sale of the country’s natural resources or from loans from the state bank causes enormous damage to the republic’s economy.
In addition, in principle, the question arises of the expediency and legality of the that the ERG is registered in the Grand Duchy of Luxembourg, since almost 68,000 of the ERG’s employees or more than 94% of its staff work at the ERG enterprises in Kazakhstan. Does not this circumstance creates conditions for committing corruption offences?
We believe that all internal corporate decisions that led to these facts are significant and couldn’t be made without the participation of representatives of the Government of the Republic of Kazakhstan in the Board of Directors of the ERG. At various times these functions were performed by the former members of the Government, Mr. Marat Beketaev, Mr. Bakhyt Sultanov and Mr. Beybut Atamkulov.
We believe that in these cases, the indicated persons committed criminal offences under Part 4 of Art. 370 and part 1 of Art. 371 of the Criminal Code of the Republic of Kazakhstan, and caused significant harm to the interests of the State.
In this regard, we ask you to check the activities of the above-mentioned representatives of the Government of Kazakhstan in the ERG Board of Directors for corruption offences, register this application in the automated database of criminal offences, initiate a criminal case, prosecute those responsibly, recognize the Republic of Kazakhstan as a victim and tell us the registration number of the criminal case.
We have been warned on criminal liability under Art. 419 of the Criminal Code of the Republic of Kazakhstan.
Elge Qaitaru Foundation